Nedcor Bank Limited v Withinshaw Properties (PTY) Ltd (A591/01) [2002] ZAWCHC 29 (30 May 2002)

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[2002] ZAWCHC 29
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Nedcor Bank Limited v Withinshaw Properties (PTY) Ltd (A591/01) [2002] ZAWCHC 29; 2002 (6) SA 236 (C) (30 May 2002)

IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
Case No: A591/01
In
the matter between:
NEDCOR
BANK LIMITED
Appellant
and
WITHINSHAW
PROPERTIES (PTY) LTD
Respondent
JUDGMENT: 30 MAY 2002
VAN
ZYL J:
INTRODUCTION
[1] During or about October 1990 the respondent,
as landlord, and Nedperm Bank Limited, as tenant, concluded a written
agreement of
lease in respect of certain business premises situated
in the Wynberg Centre, Main Road, Wynberg, for a period commencing on
1 December
1990 and terminating on 31 October 1999. With the consent
of the parties the appellant was subsequently substituted as tenant
and
remained in occupation of the premises for the duration of the
lease. On expiry of the lease, the appellant remained in occupation
of the premises with a view to effecting certain restoration
procedures required by the respondent. On completion thereof it
vacated
the premises and handed over the keys thereto on 17 December
1999.
[2] As a result of the appellant’s continued
occupation of the premises after expiry of the lease, the respondent
claimed payment
of rent in the amount of R156 468,44 for the months
of November and December 1999. It relied in this regard on an implied
agreement
of lease to the effect that the appellant would remain in
occupation of the premises “while it removed its equipment, assets,
records
and fittings”, subject to the payment of rent in the amount
R78 234,22 per month.
[3] In its reply to a request for further
particulars by the appellant, the respondent averred that one Howard
Cara and/or authorised
representatives had acted on behalf of the
appellant and one Kenneth Berezowski on behalf of the respondent in
concluding the implied
agreement. In this regard the respondent
alleged that, prior to the termination of the lease, the
representatives of the appellant
had been unable, despite requests by
the respondent, to advise as to when it intended vacating the
premises. By 29 October 1999,
however, it became apparent to both
parties that the appellant "would need to continue to occupy the
premises for an indefinite
period in order to remove its property and
reinstate the premises". As a consequence of the appellant's
inability to advise
the respondent when it would be vacating the
premises, the respondent had been "unable to advise its agents
when the property
would once again become lettable".
[4] In the alternative the respondent averred
that the appellant was obliged, upon termination of the lease, to
restore the premises
to the respondent in the same condition as at
the commencement of the lease, fair wear and tear excepted. By
failing to vacate the
premises on 31 October 1999 and restoring it
only on 17 December 1999, the appellant had breached this obligation
and was liable
to pay the respondent rent in the amount of R78 234,22
per month for the months of November and December 1999. Alternatively
it was
entitled to payment of R78 234,22 for November and R42 902,52
for December, being the
pro rata
rent payable by the appellant
for seventeen days.
[5] In the further alternative the respondent
claimed the aforesaid amount of R156 468,44 as damages arising from
the appellant’s
failure, in terms of the written lease, to vacate
the leased premises on 31 October 1999. The damages were calculated
on the basis
of the “market rental value” of the premises during
the period of the appellant’s “unlawful occupation”. To bring
its
claim within the jurisdiction of the magistrate’s court, the
respondent abandoned R56 468,44 thereof, thereby reducing the claim
to R100 000,00.
[6] In its plea the appellant denied that an
implied agreement of lease had been concluded, as alleged by the
respondent. It admitted
that it had failed to vacate the premises
before 17 December 1999, but pleaded that it had been obliged to
restore the premises "in
the same good order as they were in at
commencement of the lease". In this regard it averred that it
was an express, alternatively
an implied or tacit, term of the lease
agreement that such restoration would occur only after the appellant
had concluded business
on 31 October 1999, being "the final
business day of the lease period". The appellant hence denied
that the respondent
was entitled to rent or damages. In any event it
denied that the respondent had suffered any damages.
THE LEASE AGREEMENT
[7] For present purposes the most salient
provisions of the agreement of lease between the parties are
contained in section 32 thereof,
under the heading "Termination".
It reads thus:
Upon the
termination of this lease, notwithstanding anything to the contrary
herein contained, the Landlord may require the Tenant
at the
Tenant's sole cost and expense to re-instate the premises and
remove any alterations, extensions, renovations or the like
effected by it so that the premises are restored in the same good
order and condition as they were at the commencement hereof,
fair
wear and tear excepted.
The Tenant shall
on no account be entitled to any compensation in respect of any
alterations, extensions, renovations or the like
effected by it
(with or without the consent of the Landlord) whether or not they
are required to be removed from the premises,
which alterations,
extensions, renovations or the like shall become the property of
the Landlord immediately upon the same being
effected.
Notwithstanding
anything to the contrary the Tenant shall upon termination of this
lease for any reason restore the premises fit
for immediate
beneficial occupation and in a clean, neat and tidy condition and
in the same good order and condition as they
were at the
commencement hereof, fair wear and tear excepted.
The Tenant shall
forthwith on termination deliver all keys of the premises to the
Landlord.
[8] Section 43.1 provides that the lease
incorporates the entire agreement between the parties. They
"acknowledge that there
are no understandings, representations
or terms or conditions … other than those set out herein and that
no alteration, cancellation
and variation of this lease shall be of
any force and effect unless it is in writing and signed by both
parties".
[9] Section 50 provides that the tenant shall
occupy the premises continuously for purposes of conducting the
business of commercial
banking, as set forth in section 4 of the
schedule to the agreement.
[10] Finally, in section 51.1 provision is made
for a right of renewal of the lease subject thereto that, at least
six months prior
to the termination date, the tenant should give
written notice of its intention to exercise such right.
THE EVIDENCE
[11] Only one witness testified at the hearing. He
was Mr K S Berezowski, a director of the respondent. Much of his
evidence related
to his interpretation of the lease agreement and was
hence of little relevance in resolving the disputes before the court
a quo
. Of some significance, however, was the fact that the
appellant had leased the premises in question over a period of some
twenty-three
years in terms of three separate lease agreements, the
last of which was concluded during October 1990 (par 1 above).
Shortly after
the appellant took occupation of the premises in terms
of the initial lease agreement, it effected a number of major
improvements
to the premises, including the installation of a vault
or strong room as required for its commercial banking business. There
is no
indication that any improvements of substance were effected
during the period of the final, and for present purposes the
relevant,
lease.
[12] According to Berezowski the appellant did
not give notice in terms of section 51.1 (par 10 above) of its
intention to renew
the lease. On the contrary, during June or July
1999 it put up a notice in the window stating that the branch was to
close at the
end of October 1999. Despite this notice Berezowski and
certain staff members of the appellant discussed the possibility of
an extension
of the lease to enable the appellant to maintain its
corporate business on the leased premises in the Wynberg Centre,
while moving
only its personal banking section to Constantia Village.
Nothing came of these discussions, however, and no extension was ever
requested.
[13] The next step in the process was a discussion
during early October 1999 between Berezowski and Cara, the
appellant’s representative,
on the topic of reinstatement of the
leased premises. The appellant suggested that the respondent take
over the premises as they
were, without any of the permanent
improvements being removed. The respondent rejected this suggestion
and required the premises
to be reinstated in the same condition as
that in which they had been at the commencement of the initial lease
agreement, some twenty-three
years previously. What the condition of
the premises had been at that stage, however, was not discussed.
[14] The said discussion was followed up by a fax
dated 7 October 1999 from Cara to Berezowski, wherein the respondent
was requested
to notify the appellant of its "reinstatement
requirements". This request was repeated in a letter dated 25 or
26 October
1999. In the letter the appellant gave notice that it
would vacate the premises on 30 October 1999 and informed the
respondent that
its "tenant installations department" was
awaiting details of the said requirements. In this regard Berezowski
testified
that he had specifically told Cara that, should the
appellant vacate the premises after 31 October 1999, there would be
"cost
implications". By this he had meant rent and other
incidental costs such as electricity and rates. Cara apparently did
not respond
to this intimation. At no stage, according to Berezowski,
was it envisaged that the appellant would stay on without paying
rent.
[15] An on-site meeting was held on the premises
on 27 October 1999. Subsequent thereto ten "reinstatement
requirements"
were set forth in a fax dated 29 October 1999 from
the appellant to the respondent. The major requirement was that the
walls and
doors of the strong room and record room "be removed
and made good where necessary". As Berezowski put it, it only
later
became apparent how extremely difficult it would be to demolish
the strong room, which had been constructed with reinforced concrete.
The appellant had to make use of a front-end loader, pneumatic drill,
jackhammer and even explosives to do so. In any event it was
clear to
both parties that the reinstatement requirements would be fulfilled
only after termination of the lease, during November
or even December
1999.
[16] It is common cause that the appellant
remained on the premises, for purposes of the required reinstatement,
with the leave of
the respondent. Berezowski testified in this regard
that the appellant had the "benefit of full occupation of the
premises"
for such purpose. The parties had, he suggested,
concluded an implied agreement of lease on the basis that the
appellant would continue
paying rent while thus remaining in
occupation. If it had wished to avoid paying additional rent, it
should have commenced restoration
procedures six weeks before the
termination of the agreement.
[17] It is likewise common cause that the
appellant had accepted liability for the costs of electricity
utilised during the restoration
process, and had in fact made payment
thereof.
[18] The appellant closed its case without calling
any witnesses. After hearing argument by Mr Steltzner on behalf of
the plaintiff
and by Mr Coughlan on behalf of the defendant, the
court gave judgment in favour of the plaintiff in the amount of R78
234,22, being
rent for November 1999, and R44 902,52 as
pro
rata
rent for the first seventeen days of December 1999. In addition it
awarded interest and costs.
JUDGMENT OF THE COURT
A QUO
[19] In her judgment the learned magistrate
accepted that the appellant had remained in occupation of the leased
premises, with the
consent of the respondent, from 1 November to 17
December 1999. During this period it had engaged in restoring the
premises and not
in trading as a commercial banker. By the same token
the respondent had been unable to re-let the premises during such
period. Potential
lessees could view the premises only after it had
been restored and vacated by the appellant.
[20] On the issue whether or not an implied
agreement of lease had come into operation pursuant to the
discussions between Berezowski
and Cara, the learned magistrate held
that no
consensus
between the parties could be established in
this regard. This did not, however, mean that the appellant was not
liable for rent or
damages arising from its continued occupation of
the premises from 1 November to 17 December 1999. With reference to
the judgments
in
Sapro v Schlinkman
1948 (2) SA 637
(A),
Arnold v Viljoen
1954 (3) SA 322
(C),
Tooth and Another v
Maingard and Mayer (Pty) Ltd
1960 (3) SA 127
(N) and
Bourbon-Leftley v Turner
1963 (2) SA 104
(C), the learned
magistrate held that the appellant was indeed liable for rent, and
not damages, for the period from termination
of the lease until the
premises were actually vacated.
[21] The present appeal is directed only against
the finding of the court
a quo
that the appellant was liable
for rent as aforesaid. The respondent noted a cross-appeal against
the court’s finding that there
was no tacit relocation or implied
lease agreement concluded between the parties, and that there had
been no unlawful holding over
by the appellant or damages suffered by
the respondent.
APPELLANT'S ARGUMENT
[22] Mr Coughlan, for the appellant, devoted much
of his argument to the cross-appeal as to whether or not the
respondent's main claim,
namely the alleged tacit relocation or
implied agreement to re-let the leased premises, was justified on the
facts. Inasmuch as no
consensus
in this regard could be
inferred from the proven facts, he submitted, the court
a quo
had correctly held that no such agreement could be established. On
the contrary, the appellant's conduct indicated unequivocally
that it
had no interest in renewing the agreement. It intended, rather, to
comply with the terms, more specifically clause 32.1,
of the existing
lease agreement. Any contradiction between this clause and clause
32.3 was more apparent than real. This was supported
by the
provisions of clause 32.2, namely that "all alterations,
extensions, renovations or the like" would, upon being
effected,
forthwith become the property of the respondent.
[23] It was
clear from the facts, Mr Coughlan suggested, that the respondent was
acting in terms of the provisions of clause 32.1
when, on 29 October
1999, it informed the appellant of its reinstatement requirements.
This clause, he submitted, clearly contemplated
that the
reinstatement could be effected only after termination of the lease,
in which event the appellant would be compelled to
remain in
occupation of the premises for the duration of the reinstatement
procedure. The respondent was fully aware of this, and
hence had no
difficulty in consenting to the appellant's continued occupation of
the premises. Such occupation must, therefore, have
been lawful and
there could have been no question of unlawful holding over. There was
hence, Mr Coughlan argued no merit in the cross-appeal.
[24] In any event, Mr Coughlan submitted, even if
there had been an unlawful holding over, the respondent had failed to
prove any
damages in the form of pecuniary loss. There was no
indication that a new tenant had been secured or that the respondent
had even
attempted to attract potential tenants during the six-month
period prior to termination of the lease, as it was fully entitled to
do.
[25] Mr Coughlan submitted that the court
a quo
had erred in finding, on the second alternative claim, that the
appellant had failed to vacate the premises on termination of the
lease and was hence liable for rent during its continued occupation.
He submitted that the cases relied on by the learned magistrate
in
this regard (par 20 above) were distinguishable from the present. In
those cases the tenant had, without the consent of the landlord,
remained in occupation of the leased premises after cancellation of
the lease agreement in question. In the present case the continued
occupation of the leased premises by the tenant (appellant) was with
the consent of the landlord (respondent) and with the specific
purpose of reinstating the premises in terms of clause 32.1 of the
lease agreement. It was implicit in such clause, Mr Coughlan argued,
that the appellant would have a reasonable time within which to
complete the reinstatement. At no stage did the respondent dispute
this, nor did it suggest that the approximately six-week period
required for such reinstatement had been unreasonable.
RESPONDENT'S ARGUMENT
[26] Mr Steltzner, on behalf of the respondent,
submitted that the court
a quo
had properly relied on the
aforesaid authorities. The legal principle emanating therefrom was
that, even if a lease agreement should
be cancelled by consent, the
tenant would, in the absence of a contrary indication, remain liable
to pay rent at the agreed rate
for the actual period of occupation.
The
Tooth
case (par 20 above) was indeed a case of
cancellation by mutual agreement and hence indistinguishable from the
present case. Similarly
the
Sapro
case (par 20 above)
expressed the principle that a lessee who enjoys the full use and
enjoyment of the premises must pay the full
rent.
[27] The fact that the appellant's continued
occupation was solely for purposes of reinstating the premises was,
according to Mr Steltzner,
of no consequence. It had the obligation
to vacate the premises on termination of the lease and in fact
utilised its continued occupation
for purposes of fulfilling its
contractual obligations. The court
a quo
hence correctly held
that it was liable to pay full rent for November and a proportionate
rental for December 1999.
[28] Mr Steltzner sought support for his
contentions in the provisions of clause 32.3 of the lease agreement
in that the appellant
was required, upon termination of the lease, to
restore the premises fit for immediate beneficial occupation. Clause
32.1, he submitted,
merely empowered the respondent to require the
appellant "to do certain things" on termination of the
lease and did not
provide for "rent free" continued
occupation.
[29] Should this court be disposed to uphold any
of the appellant's contentions, Mr Steltzner argued, the respondent's
cross-appeal
should succeed, either on the basis of an implied
relocation or new lease, or on the basis of damages for breach of
contract. An
implied relocation or new lease on the same terms as the
previous lease should, he submitted, be inferred from the conduct of
the
parties. In the present case the relevant conduct was the fact
that the respondent had allowed the appellant to remain on the
premises
for purposes of reinstating it. There was hence a tacit
undertaking by the appellant to pay rent for its continued occupation
of
the premises. In the alternative, although the continued
occupation did not constitute unlawful holding over, the appellant
had breached
its obligation to restore the premises on termination of
the lease and was hence liable in damages.
THE RELEVANT LAW
Implied Agreements
[30] An implied agreement can come into existence
only if there has been a tacit acceptance of a tacit offer. The offer
and acceptance,
indicating unqualified
consensus ad idem
on
all essential aspects of the agreement, must clearly and
unequivocally be inferred from the conduct of the parties. It must,
in
accordance with what has been described as the “traditional”
approach, in fact be the only reasonable inference that can be drawn
from such conduct. See in this regard the
dictum
of Corbett JA
in
Standard Bank of South Africa Ltd and Another v Ocean
Commodities Inc and Others
1983 SA 276
(A) at 292B:
In order to establish a
tacit contract it is necessary to show, by a preponderance of
probabilities, unequivocal conduct which is
capable of no other
reasonable interpretation than that the parties intended to, and did
in fact, contract on the terms alleged.
It must be proved that there
was in fact
consensus ad idem
.
[31] Corbett JA adopted a somewhat less stringent
approach in
Joel Melamed and Hurwitz v Cleveland Estates (Pty)
Ltd; Joel Melamed and Hurwitz v Vorner Investments (Pty) Ltd
[1984] ZASCA 4
;
1984
(3) SA 155
(A) at 165B-C:
In this connection it is
stated that a court may hold that a tacit contract has been
established where, by a process of inference,
it concludes that the
most plausible probable conclusion from all the relevant proved facts
and circumstances is that a contract
came into existence …
See also
Muller v Pam Snyman
Eiendomskonsultante (Edms) Bpk
[2000] 4 All SA 412
(C) at
418
j
-419
b
, where Comrie J expressed a preference for
"the so-called traditional test, the only reasonable
interpretation test, provided
that the test is applied in a common-
sense and businesslike way". See further the exhaustive
discussion in R H Christie
The Law of Contract in South Africa
(4
th
edition 2001) 92-101.
[32] Whether or not there was an implied agreement
to renew an existing lease (a so-called “tacit relocation”), or
to conclude
a new lease on the same terms as the previous one, is
likewise dependant on the facts and circumstances of the case. More
specifically
it must be unequivocally inferred from the conduct of
the parties (lessor and lessee) that a renewed or new lease has come
into existence.
Under normal circumstances this would be the case
when the lessor allows the lessee to remain in occupation of the
leased premises
after termination of the lease, and the lessee
continues to pay rent that the lessor accepts. See in general W E
Cooper
Landlord and Tenant
(2
nd
edition 1994) 350
352; W A Joubert (editor)
The Law of South Africa
(first
reissue 1999) volume 14 (hereinafter referred to as
LAWSA
14)
par 217.
[33] This
appears to have been the approach adopted in Roman and Roman-European
law. Thus in
Digest
19.2.14, the Roman jurist Ulpian tells us
that the lessor is regarded, in such a case, as having leased the
premises anew (
ex integro locare
). An agreement then comes
into existence without the parties requiring words or writing, but
purely on the basis of
consensus
(
et huiusmodi contractus
neque verba neque scriptura utique desiderant, sed nudo consensu
convalescunt
). In his
Inleidinge tot de hollandsche
rechts-geleerdheid
(2
nd
edition by Dovring, Fischer
and Meijers, Leiden 1965) 3.19.2, Grotius (De Groot) explains that
agreements of lease may be concluded
not only by express words, but
also tacitly. This happens when the lessee of a house, after
termination of the lease, continues to
use the house, in which event
the rental is regarded as being extended for the same time as
previously agreed:
Overkominge, de
welcke verstaen werd aenghegaen te zijn, niet alleen door
uitdruckelicke woorden, maer oock stilzwijghende, indien
den huirder
nae des huirs uitgang blijft in 't ghebruick van eenig huis, want
daer door werd de huis verstaen verlengt te zijn, voor
zoo veel tijds
als de zelve te vooren was aengegaen.
Reference may also be made to Van Leeuwen
Censura
forensis
1.4.22.15 and
Het roomsch-hollandsch recht
4.21.6; Voet
Commentarius ad pandectas
19.2.9; Van der Keessel
Theses selectae juris hollandici et zelandici
671 (a
commentary on Grotius
Inleidinge
3.19.2) and
Praelectiones
juris hodierni
3.19.2; Pothier
Traité du contrat de louage
342.
[34] These principles have, in substance, become
part and parcel of South African jurisprudence, as appears from
Bowhay v Ward
1903 TS 772
at 779 (
per
Innes CJ):
[T]acit relocation
depends upon this, that both parties adopt and continue the position
which the termination of the lease found them
in; in other words,
that the lessor is content that the lessee should remain, and the
lessee is content to remain.
See also
Gau v Stokes
1903 TH 158
;
Maister
& Shagam v Bernstein
1915 CPD 373
at 377;
Tiopaizi v
Bulawayo Municipality
1923 AD 317
at 325;
Van der Merwe v
Erasmus and Another
1945 TPD 97
at 102;
Parkleigh Court (Pty)
Ltd v V M F Dairies (Pty) Ltd
1946 WLD 349
at 350.
[35] The effect of a tacit relocation is, in
general, that a new lease is concluded on the same basis as the
original lease (Pothier
op cit
363;
Licences and General
Insurance Co v Bassano
1936 CPD 179
at 185-186;
R v Cumming
1956 (4) SA 143
(E) at 145C-148A). In
Doll House Refreshments
(Pty) Ltd v O'Shea and Others
1957 (1) SA 345
(T) at 348G-H,
however, Ramsbottom J qualified this principle by stating that only
essential provisions of the original lease, and
those “incident to
the relation of landlord and tenant”, are presumed to be renewed.
Collateral provisions, which are “independent
of and not incident
to that relation”, are not presumed to be similarly incorporated in
the new lease. See also
Fiat S A v Kolbe Motors
1975 (2) SA
129
(O) at 139D-G;
Shell South Africa (Pty) Ltd v Bezuidenhout and
Others
1978 (3) SA 981
(N) at 984B-E.
[36] The mere fact that a lessee remains in
occupation of the leased premises after the expiration of the term of
the lease does not,
of course, mean that there is a tacit renewal of
the lease. Similarly the belief, or impression, of one of the parties
to the lease
that there has been a tacit relocation, is not
sufficient to bring a new lease into existence. There must be
compliance with the
requirements for an implied or tacit agreement.
See
Muller v Pam Snyman Eiendomskonsultante (Edms) Bpk
[2000]
4 All SA 412
(C) at 417
g
-
j
.
[37] A lessee is obliged to restore the leased
premises to the lessor in a good condition, or at least in
substantially the same condition
as they were in at the time he took
occupation thereof, fair wear and tear excepted. On this obligation
see Grotius
Inleidinge
3.19.11-12; Voet
Commentarius ad
pandectas
19.2.32; Van der Keessel
Pralectiones
3.9.11;
Van der Linden
Koopmans handboek
1.15.12; Pothier
Traité
du contrat de louage
197;
Bartman v Leonard and Others
1952
(2) SA 582
(C) at 596G;
Phil Morkel Ltd v Lawson & Kirk (Pty)
Ltd
1955 (3) SA 249
(C);
Sandown Park v Hunter Your Wine &
Spirit Merchant
1985 (1) SA 248
(W); W E Cooper
Landlord and
Tenant
(2
nd
edition 1994)
217-218;
LAWSA
14 par 189.
[38] Should a lessee be in breach of this
obligation, he is regarded as unlawfully "holding over".
The lessor may then have
him ejected by legal process, or claim
damages for breach of contract. See
Matz v Simmonds' Assignees
1915 CPD 34
;
Phil Morkel Ltd v Lawson & Kirk (Pty) Ltd
1955 (3) SA 249
(C);
Sandown Park (Pty) Ltd v Hunter Your Wine &
Spirit Merchant (Pty) Ltd and Another
1985 (1) SA 248
(W).
[39] There has been some debate regarding whether
or not the lessor may claim rental for the period during which the
lessee remains
in occupation of the leased premises after termination
of the lease. In the early case of
Cohen's Trustee v Rifkind and
Cumes
1914 WLD 79
at 84, Mason J held that a lessor was entitled
to rent for the actual period of occupation by the lessee after
cancellation of the
lease agreement between the parties. A similar
approach was adopted in two Cape cases, namely
Arenson v Bishop
1926 CPD 73
at 74-75 and
Parry, Leon and Hayhoe Ltd v
Yorkshire Insurance Co Ltd
1940 CPD 397
at 402.
[40] This approach was confirmed by the Appellate
Division in
Sapro v Schlinkman
1948 (2) SA 637
(A). In that
matter the plaintiff sought ejectment and damages from the defendants
(it would appear that there was more than one)
on termination of the
lease agreement between them. The matter was settled on the basis
that the parties conclude a new lease for
fifteen months on certain
conditions, one of which was that a written lease agreement would be
drawn up by the plaintiff's attorney,
one G Brown, "to
incorporate the usual terms". Their consent paper was made an
order of court. A draft agreement prepared
by Brown was rejected by
the defendants on the ground that it did not "incorporate the
usual terms". They were nevertheless
prepared to pay rent at a
significantly lower rate than that agreed upon in terms of the
consent paper. When a further draft was
likewise rejected, the
plaintiff sued them for the difference between what they had paid and
what they should have paid in terms
of the consent paper. Their claim
was successful and the defendants appealed.
[41] On appeal Davis AJA identified the salient
issue as follows (at 643):
The main point to be
considered is whether the plaintiff who, assuming that he has broken
the contract in that Brown has not to this
day tendered to the
defendants a draft lease containing "the usual terms", is
able to sue on the contract for "rent"
as fixed therein, or
whether he is not confined to claiming a reasonable compensation for
the defendant's use and occupation of the
premises.
On the assumption that the breach was serious
enough to warrant cancellation of the agreement, the learned judge
was satisfied that
the plaintiff, notwithstanding his breach, was
entitled to sue for the rent due during the full period that the
defendants had enjoyed
undisturbed occupation of the leased premises.
With reference to a number of Roman and Roman-European sources, he
concluded (at 646):
To sum up: the
authorities all show that the date that matters in regard to the
termination of the lessee's ability to pay rent in
terms of the lease
is not the date of the breach, or the date on which the lessee
purported to cancel the lease, but the date on
which he actually
quitted the premises.
The appeal was accordingly dismissed.
[42] In
Arnold v Viljoen
1954 (3) SA 322
(C) the applicant sought to recover certain monies, including rent
for one month and twenty-two days, owing to him in terms of an
agreement of lease. The respondent refused to pay on the basis that
the leased premises were in such a bad state of disrepair that
they
were rendered substantially unfit for the purpose for which they had
been leased. He thereupon purported to cancel the lease
and vacate
the premises. Van Winsen J, relying on
Sapro v Schlinkman
(par
40 above), held (at 330B):
I think the test for the
tenant's liability for rent is whether he was in occupation or in
possession of the leased premises and not
whether such occupation or
possession was beneficial or not.
[43] In the case of
Tooth and Another v
Maingard and Mayer (Pty) Ltd
1960 (3) SA 127
(N) the parties to a
lease agreement terminated the lease by mutual agreement. After the
date of termination, however, the lessee
remained in occupation of
the leased premises in that certain goods belonging to its customers
remained stored on the premises for
some twenty-four days. During
that period the lessee retained the keys to the premises. When the
lessor claimed rent for such period,
the lessee refused to pay on the
basis that the lease had already terminated. The court of first
instance gave judgment in favour
of the lessee. On appeal, however,
Henochsberg J, also relying on the
Sapro
case (par 40 above),
held (at 130E) that a person cannot be regarded as having vacated
premises if he has deliberately stored goods
thereon, after removing
his own property. In this regard the learned judge averred (at
131E-F):
It seems to me that, in
arriving at his conclusions, what the magistrate has failed to
appreciate is that it is a principle of our
law that, if a lease is
cancelled by mutual agreement of the parties, the lessee in the
absence of expression to the contrary remains
liable to pay rent at
the agreed rate for the actual period of occupation.
And at 132H:
Even if a lessee has just cause for quitting
premises hired, he is liable to pay rent in so far as he has made use
of the property
hired.
The fact that the lessee had stored the goods of
clients on the premises and had charged them storage fees for such
service constituted,
in the opinion of the learned judge (at 134A),
"actual occupation" of the premises.
[44] The
Sapro
case (par 40 above) was also
followed in
Bourbon-Leftley v Turner
1963 (2) SA 104
(C) at
106E-F. In that case the lessee cancelled the lease because the
lessor had not complied with certain obligations in terms
thereof. He
thereupon tendered the keys of the leased premises, maintaining that
all goods on the premises had been removed. It would
appear, however,
that an Aga stove remained on the premises after the lessee had
vacated it. This prompted Banks J to hold (at 107C)
that the lessee
could not be said to have vacated the premises in that the stove,
which was large and heavy, was "likely to
interfere materially
with the enjoyment of occupation by some other person". The
lessee was hence liable to pay rent during
the period of his actual
occupation of the premises.
[45] These authorities have not enjoyed general
acceptance. The fundamental criticism has been that, if a lease
agreement has been
terminated by cancellation or otherwise, the
rights and obligations attaching thereto are terminated. The lessor
cannot then claim
arrear rent from the lessee should he remain in
occupation of the premises after such termination. This would, it is
suggested by
A J Kerr "Incompatible Remedies for Breach of
Contract: Is Lease a Special Case?" in 90
SALJ
(1973)
228-233 at 229, constitute "a radical departure from the general
rule that an aggrieved party cannot both cancel a contract
and sue
for specific performance". See in this regard
Custom Credit
Corporation (Pty) Ltd v Shembe
1972 (3) SA 462
(A) at 469G-H.
His remedy would under normal circumstances, Kerr opines, be
directed at damages for breach of contract.
[46] This appears to have been the approach in
Easton Investment Co (Pvt) Ltd v Edwards
1967 (2) SA 83
(R) at
87B-C, where Davies J said:
In principle rent is a
payment for the right to use and occupy the leased premises. Where
such right is denied the tenant, for whatever
reason, it is contrary
to principle to enforce the obligation to pay rent. On this basis,
therefore, I am of the opinion that the
petitioner has no right to
claim any amount as rent in respect of the period subsequent to his
cancellation of the agreement, but
is restricted to a claim for
damages.
See also
Alphedie Investments (Pty) Ltd v
Greentops (Pty) Ltd
1975 (1) SA 161
(T) at 164E-165A;
Ntshiqa
v Andreas Supermarket (Pty) Ltd
1997 (3) SA 60
(TkSC) at 64G-65J;
Thompson v Scholtz
[1998] ZASCA 87
;
1999 (1) SA 232
(SCA) at 244I-247C; A J
Kerr "Difficulties in Sapro v Schlinkman" in 92
SALJ
(1975) 250-252; W E Cooper
Landlord and Tenant
(2
nd
edition 1994) 163-167; A J Kerr
The Law of Sale and Lease
(2
nd
edition 1996) 377-381;
LAWSA
14 par 189-190.
APPLICATION OF THE RELEVANT LAW IN THE PRESENT
MATTER
[47] It is abundantly clear that, after
termination of the lease on 31 October 1999, the appellant remained
lawfully in occupation
of the leased premises until 17 December 1999
with a view to complying with what it believed its obligations were
in terms of section
32 of the lease agreement between the parties
(par 7 above). It was in fact doing so at the request, and with the
unqualified consent,
of the respondent. The sole object of its
continued occupation of the premises was to restore the premises to
their pristine condition
and not to conduct the business of
commercial banking, as required by section 50 of the agreement (par 9
above). There was hence
no question of an unlawful holding over or of
any other form of breach of contract that might justify cancellation
of the agreement
and substantiate an action for damages (par 37-38
above).
[48] There was likewise no indication of any tacit
or implied agreement of relocation, in that none of the legal
requirements for
an agreement of this nature was present at the
relevant time (par 30-35 above). On the contrary, the appellant made
it eminently
clear that it had no intention of renewing the lease, in
that it did not give notice of such intention, as required by section
51.1
of the agreement (par 10 above). In addition, on Berezowski's
own evidence (par 12 above), the appellant put up a notice in the
window
informing customers and clients that the branch was to close
at the end of October 1999. The only unequivocal inference (par 32
above)
that can be drawn from this conduct is that the appellant had
decided not to renew the lease. Berezowski's belief that he and Cara
had in fact concluded an implied agreement of lease (par 16 above)
cannot substantiate a tacit or an implied relocation (par 36
above).
This belief was probably prompted by wishful thinking and by the hope
that so valuable a tenant as the appellant might reconsider
at least
a partial relocation of the premises.
[49] It follows that I am in respectful agreement
with the learned magistrate’s finding (par 19 above) that the
appellant’s continued
occupation of the leased premises was with
consent and hence could not constitute unlawful holding over. I
likewise respectfully
agree with her finding that the respondent was
unable to prove that an implied agreement of lease had been concluded
(par 20 above).
I have some difficulty, however, with the finding,
based on the
Sapro
,
Arnold
,
Tooth
and
Bourbon-Leftley
judgments (par 40-44 above), that the
appellant was liable for rent for the period during which it remained
in occupation of the
leased premises.
[50] The said judgments do not, with respect,
justify such a finding. They are all, in my view, distinguishable
from the present matter
in that the continued occupation of the
defendant in each case was without the consent of the plaintiff,
after the lease had already
been terminated, be it by way of
cancellation (as in
Sapro
,
Arnold
and
Bourbon-Leftley
)
or mutual agreement (as in
Tooth
). For present purposes it is
not necessary to consider the criticism directed at these judgments
(par 45-46 above), although it would,
in my respectful view, be more
correct to allow a claim in damages than one directed at the recovery
of arrear rental. The
quantum
of a claim for damages for
wrongful holding over, constituting a breach of contract and
justifying cancellation of the agreement,
would in all probability
not differ substantially, if at all, from a claim for specific
performance directed at the recovery of rent
due in terms of such
agreement. Once a party to the lease agreement has, however, elected
to cancel it, or the parties have mutually
agreed to terminate it,
the rights and obligations relating to the payment of rent must be
regarded as having likewise terminated.
Should the lessee then fail
to restore the leased premises to the lessor, he would be liable to
him in damages. It may well be appropriate,
I respectfully suggest,
for the Supreme Court of Appeal to reconsider the
ratio
underlying the
Sapro
judgment, should the opportunity arise.
[51] The appellant avers that it remained in
lawful occupation of the premises in order to comply with its
obligation to restore the
premises "in the same good order as
they were in at commencement of the lease" (par 6 above). It
could be argued that it
was complying with its obligations in terms
of section 32.3 of the agreement (par 7 above). That section
provides, however, that
the tenant must
restore the premises
to the landlord "upon termination of this lease for any reason".
The premises must then be "fit for immediate beneficial
occupation and in a clean, neat and tidy condition and in the same
good order and condition as they were in at the commencement hereof,
fair wear and tear excepted". This accords with the common law
obligation of the lessee to return the premises to the lessor,
in
good order, immediately on termination of the lease (par 37 above).
[52] It would appear, however, that the appellant
was not simply complying with the provisions of section 32.3, but was
intent, rather,
on carrying out its perceived obligation in terms of
section 32.1 (par 7 above). Such obligation was to
reinstate the
premises
by removing "any alterations, extensions,
renovations or the like effected by it". After completing such
reinstatement,
the lessee would return the premises to the landlord
"in the same good order and condition as they were in at the
commencement
hereof, fair wear and tear excepted".
[53] Although the qualification relating to "the
same good order and condition" accords with that used in section
32.3,
the nature of the obligation contained in section 32.3 differs
toto caelo
from that envisaged by section 32.1. Section 32.3,
couched in peremptory terms, requires that, on termination of the
lease for whatever
reason, the tenant
shall
forthwith restore
the premises to the landlord in the said "good order and
condition", so that it may immediately be available
for
beneficial occupation by another tenant. Section 32.1, however,
accords the landlord a right, which he
may
, in his discretion,
exercise should he so wish, to require the tenant to re-instate the
premises to their original state. Should
the landlord choose not to
exercise this right, the tenant would obviously still have to comply
with his obligation in terms of section
32.3.
[54] Inasmuch as section 32.3 requires the tenant
to render the premises "fit for immediate beneficial
occupation", he must,
prior to the termination of the lease,
ensure that it is clean, neat and tidy and in "the same good
order and condition"
as at the commencement of the lease. This
would enable him to return the premises to the landlord immediately
"upon the termination
of the lease". In the case of section
32.1, however, the tenant is largely in the hands of the landlord,
who is entitled to
wait until the lease expires before exercising his
right to reinstatement of the premises. If he should wait until then,
it is abundantly
clear that the tenant would require time to comply
with his request and would of necessity have to remain in occupation
of the premises
until completion of the reinstatement. It may be
accepted that, in such an event, it would be an implied term that the
reinstatement
should be completed within a reasonable time.
[55] It is significant that, in the present case,
the respondent did not exercise its right in terms of section 32.1
before being
requested by the appellant, in the fax from Cara to
Berezowski dated 7 October 1999, to notify the appellant of its
"reinstatement
requirements" (par 14 above). After
receiving no response, this request was repeated in a letter dated 25
or 26 October 1999.
This gave rise to an on-site meeting on 27
October 1999 (par 15 above), which was followed up by a fax
containing a list of ten “reinstatement
requirements”. This fax
was received on 29 October 1999, just two days before the lease was
due to expire. Even the most superficial
perusal of the fax would
make it clear that the reinstatement sought by the respondent would
require a considerable time to be completed.
This was quite properly
conceded by Berezowski, when he testified that the demolition of the
strong room could not be effected without
the use of heavy machinery
and even explosives.
[56] It would appear that both parties understood
that the reinstatement obligation arising from section 32.1 of the
agreement was
that the premises were to be restored to their original
condition, that is to say the condition they were in at the time the
first
of three leases between the parties was concluded, some
twenty-three years previously. Why this was their understanding is
not clear
from the papers or the evidence. For purposes of
interpreting the lease in question, namely the third and final lease
concluded during
October 1990, the first two leases were irrelevant
and the condition of the premises at the commencement of such prior
leases was
likewise irrelevant.
[57] The condition of the premises, for purposes
of interpreting section 32.3 of the relevant lease, was that which
they were in
at the commencement of such lease during October 1990.
Inasmuch as the major improvements effected by the appellant dated
back to
the period of the first lease, such improvements, including
the vault or strong room, were clearly already part of the leased
premises,
and hence the property of the respondent, on the date the
relevant lease was concluded. In terms of section 32.1 thereof, the
respondent
could require the appellant to remove only those
“alterations, extensions, renovations or the like” which were
effected during
the period of such lease. It hence had no right to
require the appellant to remove the strong room or any other
improvement or fixture
dating back to the period of the first or
second leases.
[58] It would appear, therefore, that the
appellant, at some considerable expense to itself, effected certain
reinstatements it was
not required to do in terms of section 32.1 of
the agreement. It is of concern, and indeed most unfortunate, that
the misinterpretation
of this section, apparently by both parties,
has resulted in what would appear to be unnecessarily incurred costs
of restoration
and, for that matter, of subsequent litigation.
[59] It follows from the above that it could
clearly not have been the intention of the parties that the appellant
should pay rent
for the period during which it was compelled to
remain in occupation of the leased premises while complying with the
respondent’s
request for reinstatement thereof. Both parties must
have contemplated that, should the respondent exercise its
discretionary right
to require reinstatement of the premises, this
would take place only after termination of the lease. It could never
have been their
intention that the reinstatement should be effected
before termination of the lease. That this would have been a physical
impossibility
is confirmed by the fact that the respondent presented
the appellant with its list of requirements only two days before the
termination
of the lease.
[60] It was at no time suggested that the period
of seventeen days utilised by the appellant to effect the
reinstatement was unreasonable,
bearing in mind the nature and extent
of the requirements put to it. There can hence be no basis for any
claim, in contract or delict,
that the appellant had delayed the
reinstatement to the respondent’s detriment and caused it damages.
CONCLUSION
[61] It follows that the appeal must succeed and
the order of the court
a quo
set aside. In the event I would
make the following order:
1. The appeal is upheld with costs.
2. The order of the court
a quo
is set
aside and substituted by the following:
“The Plaintiff’s claim is dismissed with
costs”.
D H VAN ZYL
Judge of the High Court of South Africa
I agree.
Y S MEER
Acting Judge of the High Court of South Africa
It is so ordered.
D H VAN ZYL
Judge of the High Court of South Africa